TO THE MEMBERS OF ACC LIMITED
The Directors are pleased to present the Eighty Third Annual Report of the Companytogether with the audited financial statements (Consolidated and Standalone) for the yearended December 31 2018. The section on Management Discussion and Analysis (MD&A)forms a part of this report.
1. FINANCIAL RESULTS
| ||Consolidated ||Standalone |
| ||Rs Crore ||Rs Crore |
| ||2018 ||2017 ||2018 ||2017 |
|Revenue from Operations* ||14801.62 ||13263.12 ||14801.35 ||13262.59 |
|Other Income ||142.66 ||128.86 ||138.50 ||131.65 |
|Total Income ||14944.28 ||13391.98 ||14939.85 ||13394.24 |
|Profit before Tax ||1510.11 ||1310.06 ||1494.29 ||1298.36 |
|Tax Expenses** ||(10.51) ||385.55 ||(12.34) ||382.91 |
|Profit for the year ||1520.62 ||924.51 ||1506.63 ||915.45 |
|Attributable to: || || || || |
|Owners of the Company ||1520.47 ||924.41 ||1506.63 ||915.45 |
|Non-controlling interests ||0.15 ||0.10 ||- ||- |
|Other Comprehensive Income (OCI) ||(4.84) ||2.24 ||(4.85) ||2.37 |
|Total Comprehensive Income ||1515.78 ||926.75 ||1501.78 ||917.82 |
|Owners of the Company ||1515.63 ||926.65 ||1501.78 ||917.82 |
|Non-controlling interests ||0.15 ||0.10 ||- ||- |
|Opening Balance in retained earnings ||5526.05 ||4983.63 ||5541.33 ||5007.74 |
|Amount available for appropriations ||7041.68 ||5910.28 ||7043.11 ||5925.56 |
|Appropriations: || || || || |
|Interim Dividend paid for 2017 ||- ||206.57 ||- ||206.57 |
|Final Dividend paid || || || || |
|- For 2017 ||281.68 ||- ||281.68 ||- |
|- For 2016 ||- ||112.67 ||- ||112.67 |
|Tax on Equity Dividend ||57.90 ||64.99 ||57.90 ||64.99 |
|Closing Balance in retained earnings ||6702.10 ||5526.05 ||6703.53 ||5541.33 |
*Figures for Revenue from Operations are comparable numbers .i.e Excise Duty has beenremoved as the same does not form part of Revenue post GST implementation.
**Including write back of Rs 500.63 crore relating to tax provision of earlier years.
2. OVERVIEW OF COMPANY'S FINANCIAL PERFORMANCE
Consolidated income comprising of revenue from operations (net of excise) and otherincome for the year was 3 14944.28 crore 12% higher as compared to 3 13391.98 crore in2017.
Total consolidated revenue from operations (net of excise) increased to 3 14801.62crore from 3 13263.12 crore in 2017.
Other operating revenue for the year 2018 was 3 324.15 crore representing a decrease of8 % over the previous year.
Consolidated Profit Before Tax for the year was 3 1510.11.crore as compared to 31310.06 crore in 2017.
Consolidated Profit After Tax for the year was 3 1520.62 crore as compared to 3 924.51crore in 2017.
No material changes or commitments have occurred between the end of the financial yearand the date of this Report which a3ect the financial statements of the Company in respectof the reporting year.
The Board of Directors has recommended payment of dividend of 3 14 /- per Equity Shareof 3 10 face value aggregating to 3 316.94 crore (including tax on dividend).
The Dividend Distribution Policy of the Company is annexed to this Report as Annexure'A' and is also uploaded on the Company's website athttp://www.acclimited.com/assets/new/new_ pdf/Dividend_Distribution_Policy.pdf Unclaimeddividends pertaining to the 73rd Final dividend and the 74th Interim dividend respectivelyfor the years 2010 and 2011 totaling to 3 4.08 crore have been transferred to the InvestorEducation and Protection Fund in accordance with Statutory requirements.
4. SHARE CAPITAL
The Company's paid-up Equity Share Capital continues to stand at Rs 187.79 crore as onDecember 31 2018.
During the year the Company has not issued any shares or convertible securities. TheCompany does not have any Scheme for issue of shares including sweat equity to theemployees or Directors of the Company.
5. FINANCIAL LIQUIDITY
Cash and cash equivalent as at December 31 2018 was 3 2933.21 crore (Previous year 32559.66 crore).
The Company's working capital management is robust and involves a well-organizedprocess which facilitates continuous monitoring and control over receivables inventoriesand other parameters.
6. CREDIT RATING
As in the previous years CRISIL has given the highest credit rating of CRISIL AAA/STABLE for long term and CRISIL A1+ for short term financial instruments of the Company.This rea3rms the high reputation and trust the Company has earned for its sound financialmanagement and its ability to meet financial obligations.
The Company has not accepted any deposits falling under the ambit of Section 73 of theCompanies Act 2013 (hereinafter referred to as "The Act") and the Rules framedthereunder during the year under review.
8. PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS
Details of Loans Guarantees and Investments covered under the provisions of Section186 of the Act are given in the Notes to Financial Statements (Refer Note No. 47).
9. ECONOMIC SCENARIO AND OUTLOOK
The Indian economy started the 3scal year 2018 with an upward trajectory showing arobust growth of 7.4%. The improvement in the economic scenario has led to increase ininvestments in several sectors of the economy.
In the union budget 2019 the Government has committed to further strengtheninfrastructure initiatives. We believe that these will positively impact cement demand andboost economic growth. The silver linings on the horizon are that World Bank has forecastthat private investments in India shall grow by 8.8% in FY 2018-19 to overtake privateconsumption growth of 7.4% and thereby drive the growth in India's Gross Domestic Product(GDP) in FY 2018-19. Investments are expected to 3ow in sync with a rising trend incapacity utilization.
Approximately 1.29 million houses have been constructed till December 2018 underGovernment of India's Pradhan Mantri Awas Yojana (Urban). Cement sector recorded a robustgrowth during the year as compared to the previous year. India has retained its positionas the third largest "start-up" base in the world. According to a report byNASSCOM over 4750 technology startups and about 1400 new start-ups have been foundedin 2016. India's labour force is expected to touch 160 -170 million by 2020 based on rateof population growth increased labour force participation and higher education enrolmentaccording to a study by ASSOCHAM and Thought Arbitrage Research Institute.
The Government of India under the "Make in India" initiative has providedan environment to give a boost to the manufacturing sector and aims to take it up to 25%of the GDP from the current
17%. It also aims to increase the purchasing power of the average Indian consumerwhich would further boost demand and stimulate development in addition to bene3ttinginvestors. The Government's "Digital India" initiative which focuses on threecore components: creation of digital infrastructure delivering services digitally andincreasing digital literacy will lead to empowerment in the rural areas.
10. CEMENT INDUSTRY 3 OUTLOOK AND OPPORTUNITIES
Cement Industry Overview and Market Size
India is the second largest cement producer in the world with a cumulative 502 milliontonnes per annum (MTPA) cement production capacity in 2018 which is estimated to touch550 MTPA by 2020. Cement sector has recorded growth of ~8.5% during 2018 as compared to~6% in 2017. Domestic cement production was higher by ~8% at 325 million tonnes in 2018against 301 million tonnes in 2017.
Cement being a bulk commodity is a freight intensive industry and transporting itover long distances can prove to be uneconomical. This has resulted in cement beinglargely a regional play with the industry divided into five main geographic regions viz.(i) North (ii) South (iii) West (iv) East and(v) Central. The Southern region of Indiahas the highest installed capacity accounting for about one-third of the country's totalinstalled cement capacity.
Cement demand is expected to be driven by Eastern Central and Northern regions. Goingforward the markets in the Eastern region would hold out opportunities for cementcompanies to ride the crest of demand.
As per Indian Brand Equity Foundation (IBEF) in FY 2019 demand for cement is expectedto grow by 7-8% led by a3ordable housing rural Individual Home Builders (IHBs) andinfrastructure - led activities. The housing and real estate sector is the biggest demanddriver of cement accounting for about 65% of total consumption in India as atDecember2018.IntheBudget2018-19Government of India has announced setting up of anA3ordable Housing Fund under the National Housing Bank (NHB) for easing credit tohomebuyers. This move is expected to further boost the demand for cement from the housingsector.
Other major demand for cement comes from public infrastructure which is ~ 20% and forindustrial development which is ~ 15%. The Government of India is strongly focused oninfrastructure development to boost economic growth. Aiming for 100 smart cities it alsointends to expand the capacity of the railways and the facilities for handling and storageat railway sidings and ports with a view to ease the transportation of cement and reducetransportation costs. These measures apart from bene3tting the cement industry would alsoprovide opportunities for higher demand for cement on account of increased constructionactivity.
With anticipated increase on infrastructure spending the cement sector is expected togrow and in turn positively impact India's economy.
12. SALES VOLUME & PRICING
Cement sales of the Company in 2018 increased by 8% to 28.37 million tonnes from 26.21million tonnes achieved in 2017. Retail Segment (Individual House Builders & Groundplus three storey (G+3) Buildings) continue to remain the largest customer segment interms of volume and profitability. Your Company has also carved out for itself a niche ininfrastructure commercial and institutional buyer segments which contributes to thebottom line. For these segments which are mainly "B2B" contracts an integratedapproach to marketing is followed where the Company partners with Government authoritiesand construction companies to provide value added products and services for infrastructureand urban rejuvenation projects. With increasing urbanization and greater ruralempowerment the demand from these sectors is expected to accelerate.
13. MARKET DEVELOPMENT
The name "ACC" is synonymous with cement. The Company has over its 83 yearsof existence assiduously built a strong brand equity and brand recall and has a strongcustomer base which is loyal to the Brand.
Your Company sells ~ 80% of its cement in retail i.e Business to Consumer (B2C) whichit services through its strong channel network of ~ 11000 Dealers and ~ 35000 Retailers/Sub-Retailers located across the length and breadth of the country. For developing itsBusiness to Business (B2B) customer base dedicated teams have been set up to serviceresidential and infrastructure segments.
Over the years the Company's marketing teams have developed a deep understanding ofcustomer preferences and requirements which enables it to maximize utilization of existingcapacity on "product value-based volume strategy". This has resulted in creationof new revenue lines with introduction of new product. Composite Cement has been launchedand its volumes scaled up in the Eastern region. The sale of premium products has beenramped up. Substitution of Ordinary Portland Cement (OPC) with more environment friendlyPortland Pozzolana Cement (PPC) and Portland Slag Cement (PSC) and new value added highperformance cements and solutions have been added to the product portfolio. ACC LEAKBLOCK a water proo3ng solution for retail segment has been introduced.
With a view to increase the share of wallet per counter and to remain connected withthe channel and retail customers various steps have been taken for e3ective channelmanagement. The web based "ACC Dealer Connect App/Portal" enables the channel todigitally transact and track information on real time basis and "Service ConnectApp" helps to digitally capture 100% site information of In3uencers for e3ectiveconversion and providing on-site services to home builders. The "Construction kaDoctor" serves as a help desk to answer technical queries provide guidance on cementapplications and onsite service interventions to Individual House Builders therebyo3ering better value proposition to our customers.
ACC's branding team has e3ectively used social media to launch and promote theCompany's product and services thereby further strengthening the "ACC" Brand.
Thus your Company is able to create an experience of "customer delight"through its products and services and thereby has expanded its market reach.
14. CEMENT BUSINESS 3 PERFORMANCE
| ||2018 ||2017 ||Change % |
|Production - million tonnes ||28.36 ||26.56 ||7 % |
|Sales Volume - million tonnes ||28.37 ||26.21 ||8 % |
|Net Sale Value (Rs crore) ||13387.09 ||11993.63 ||12 % |
|Operating EBITDA (Rscrore)* ||1981.17 ||1794.15 ||10 % |
|Operating EBITDA Margin (%) ||14.80 ||14.96 ||(16) BPS |
* excluding employee separation cost of Rs 70.37 crore in 2018
14.1. Costs Cement Business
During the year 2018 the Company maintained a close focus on e3ective cost managementthrough various proactive initiatives across its facilities and operations. a) Cost ofmaterials consumed
The input cost of materials consumed per tonne of cement during the year was higher by11% as compared to 2017.
Higher procurement costs of slag impacted material cost adversely. The surge in demandfor slag and procurement from long lead sources led to price increase resulting in 55%increase in the landed cost of slag.
The landed cost of 3yash reduced by 4% as against previous year on account of increasedusage of cheaper wet 3yash and through source-mix optimization.
Increased usage of cheaper activated gypsum and procurement from cheaper sources helpedin reducing the gypsum cost by 5%.
The above measures as also other measures taken by the Company for improvingmanufacturing efficiency parameters and for product mix optimization have to some extenthelped in mitigating the steep rise in the cost of materials.
Sustained e3orts were made to improve 3yash absorption which enabled the Company toreduce the clinker factor by producing a higher share of blended cements which in turn hada positive impact on the contribution despite sharp rise in the cost of slag as statedabove.
b) Power & Fuel
Power & Fuel costs account for ~25% of the total operating cost. Optimizing powerand fuel costs is one of the major drivers for improving the Company's operationalperformance. The Company constantly endeavours to reduce fuel costs by maximizing the useof linkage coal judicious procurement of market coal through e-auctions and importsbetter fuel mix higher use of cheaper coal and use of alternative fuels. As a result ofthese initiatives kiln thermal efficiency improved by 4MJ to 3099 MJ /per tonne ofclinker during the year as against 3103 MJ/per tonne of clinker in 2017 Electrical energyefficiency improved by ~1 kwh to 69 kwh/t of clinker as against 69.9 kwh/t clinker in 2017and by 1.6 kwh to 38.5 kwh/t of cement grinding as against 40.1 kwh/t cement grinding in2017. This to a large extent helped in containing the adverse impact caused by increase inthe per tonne cost of Power and Fuel to 7% over the previous year.
Thermal power cost was adversely impacted on account of increase in prices of pet cokeand imported as well as domestic coal. Non-availability of linkage coal owing toprioritization of allotments to the power sector was another factor which led to theincrease in Thermal Power Cost. The generation cost per Kwh of the Company's thermal powerplants (TPP) in 2018 went up by 6.7% to Rs 5.39 per unit as against Rs 5.05 per unit in2017. The Company's Waste Heat Recovery plant of 7.5 MW at Gagal delivered a saving of
Rs 22 crore during the year. c) Freight & Forwarding expenses
Freight and Forwarding expenses during the year were Rs 3876.08 crore as compared to
Rs 3338.96 crore in 2017. This was on account of higher volume of despatches rise indiesel prices and increase in packing material costs on account of increase inpolypropylene prices. Clearing and forwarding charges were also higher due to hiring ofadditional godown space and higher handling of premium products. This increase was despitethe continuous e3orts made to improve evacuation efficiency reduce lead by increasing themarket share in home markets availing of bene3cial railway schemes for freight reductionbenchmarking and renegotiation of contracts with the transporters. d) Employee costs Employeecosts during the year increased by 7%. The Company has taken out various initiatives whichare expected to improve productivity and optimize employee costs.
15. CAPACITY EXPANSION
The Board of Directors has granted its approval to the Company for setting up : i. AGreen3eld Integrated Cement Plant at Ametha District Katni Madhya Pradesh (Clinkercapacity of 3 MTPA and Cement capacity of 1 MTPA) along with expansion of the existinggrinding unit in Tikaria Uttar Pradesh (Cement capacity of 1.6 MTPA) and a third grindingunit also in Uttar Pradesh (cement capacity 2.2 MTPA) ii. 1.1. MTPA Cement GrindingFacility at the existing location at Sindri Jharkhand. The above projects are estimatedto cost
~ Rs 3000 crore which is proposed to be funded through internal accruals. The saidexpansion will help the Company to maintain the price premium and strengthen its productportfolio. Ramp up of capacity as aforesaid is also likely to be supported by a demandgrowth will enable the Company to strengthen its market share in the Central and Easternmarkets.
16. READY MIX CONCRETE AND ICI BUSINESS 16.1 Ready Mix Concrete (RMX):
During the year 2018 RMX has surpassed its performance over the earlier yearswitnessing a substantial growth both in terms of volume and EBITDA.
| ||Unit ||2018 ||2017 ||Change % |
|RMX ||Lakh ||31.29 ||27.29 ||15% |
|Production ||m3 || || || |
|Volume || || || || |
|RMX Sales ||Lakh ||31.57 ||27.10 ||16% |
|Volume ||m3 || || || |
|Net Sale ||3 Cr ||1306.38 ||1140.48 ||15% |
|Value || || || || |
|Operating ||3 Cr ||133.83 ||114.98 ||16% |
|EBITDA || || || || |
|Op. EBITDA ||% ||10.24 ||10.08 ||16 BPS |
|Margin || || || || |
The RMX business of the Company has been consistently performing well. RMX sales volume& EBITDA rose by 16% in 2018 as compared to the previous year.
During the year RMX business expanded its footprint by adding 18 new Plants. ThesePlants are located in high contribution and high EBITDA margin markets across the country.With this addition the nationwide network of RMX Plants comprises of 75 state-of-the-artPlants.
Over the years RMX business arm of the Company has developed a wide customer baseacross diversi3ed profitable construction segments ranging from residential / commercialbuilding complexes to infrastructure projects including underground metro projects andindividual house builder (IHB) segment. Each segment/ project has its special requirementof concrete application and construction needs. The RMX business with its technicalcapabilities and its range of Value Added Products and solutions stands out among otherready mix concrete suppliers as a solution provider for varied construction needs. Tosupport the road segment a "rapid hardening ready to use material" has beendeveloped specially to counter the menace of potholes on the roads. This 15 minutespothole repair solution allows the road to be opened for tra3c within 15 minutes after itsapplication. The product has been successfully demonstrated to the concerned Municipalauthorities in Bengaluru and Mumbai.
Some of the other special application products recently developed are 3re resistanceconcrete and thermal insulation concrete.
Keen focus on day-to-day sales rigorous business tracking mechanism a well-de3nedpricing policy and increase in sale of "Value Added Solutions" (VAS) were someof the key success factors for the RMX business in the year 2018.
16.2 B2B- Focused approach on Infrastructure & Residential Projects Infrastructuredevelopment gained momentum in 2018 with the impetus received from Government schemesunder implementation for the development of roads rail and metro as part of urbanrejuvenation.
With an Integrated B2B approach the Company is well poised to o3er customised cementapplications value added products and services to its customers. RMX teams are engagingwith customers/clients from the initial stage of projects. With this integrated marketingapproach B2B sales have grossed 5.79 mio MTPA in 2018. RMX teams have been promoting theuse of environmentally friendly blended cement for use in infrastructure projects. Thischange in specification of cement from OPC to blended cements like PPC/ PSC has been aslow journey and has posed a huge challenge in view of the set market practice of makingconcrete at site which is more cost e3ective for the contractors. The RMX teams' e3ortstowards promoting the use of RMX made with blended cement for infrastructure projects andlarge /mid-size real estate developers has resulted in increased sales of 2.6 mio MTPA inthis product range which represents a 10% increase over the previous year 2017.
Focus will continue in the current year to win in the markets with customer engagementat all levels.
17. SUSTAINABLE DEVELOPMENT 3SD3
Your Company's tryst with sustainability which began from the nascent years of itsincorporation has received greater vigour and focused attention in recent years. YourCompany has been releasing its Sustainability report as per Global Reporting Initiative(GRI) framework since 2009. The Sustainability Report is available on the Company'swebsite at www.acclimited.com.
17.1 SD 2030 Plan Building for Tomorrow
In 2016 a structured sustainability strategy was drawn up under "SD 2030Plan" de3ning the focus areas viz. (i) climate (ii) circular economy (iii) water& nature and (iv) people & communities and the roadmap with measurable targetsto achieve the set goals by 2030. The SD 2030 Plan is aligned with the LafargeHolcimGroup's Plan. In line with "SD 2030 Plan" during the year the Company hastaken various initiatives to achieve the set targets. Snippets of this journey are set outbelow:
As per the SD 2030 Plan which charts the sustainable development roadmap the Companyhas taken a target to reduce Specific CO2 emissions by 40% per tonne of cement (vis-a-visthe base of 1990). To achieve this following initiatives were continued with vigourduring the year which have resulted in reducing specific CO2 emission to 504.55 kg/T ofcement in 2018 a reduction of ~3.8% over the previous year. a) Clinker Factor
The percentage of emission CO2 is directly proportionate to the manufacture of OPC.During the year the manufacture of blended cement was increased to ~88% and compositecement has been launched in the Eastern Region. This has enabled a reduction of 1.68% inemission.
Reducing Thermal Energy: Your Company has implemented various energy conservationmeasures which have helped in reducing the Thermal energy from 3103 MJ/T to 3099 MJ/T ofClinker. b) Green Energy and Power Generation through Waste Heat Recovery System
The Company has installed wind farms in three States viz. Tamil Nadu Rajasthan andMaharashtra with a total capacity to generate ~19MW of renewable energy. 34.74 millionunits of renewable energy were generated from these captive sources during the year.Additional "green power" of 44.48 million units were procured through PowerPurchase Agreements. Thus 80.68 million units of "green energy" were used in2018 representing an increase of 83.70% as compared to the previous year.
The Waste Heat Recovery system at Gagal Cement Works also generated 52.97 million unitsof green electrical energy during the year. d) Alternative Fuels and Raw Materials(AFR)
The manufacture of cement is an energy intensive process. Coal and petcoke are the mainfuels used by the cement industry in India. The use of these fuels is not sustainable asit produces higher % of emission.
Further the use of coal leads to depletion of natural resources. Accordingly the useof alternative fuels (AFR) in the production of cement is a preferred option. The Companyhas set up platforms for co-processing hazardous non hazardous and municipal waste foruse as "Refuse Derived Fuel" (RDF) and biomass in its kilns wherever permissibleby law and recently this facility at Wadi Cement works has been expanded.
Through its "Geocycle" activity continuous e3orts are made by the Company toprovide safe waste management solutions to industries and municipalities while meeting thehighest standards of health safety and sustainability. Geocycle is also promoting the useof alternative fuels through advocacy at appropriate forums and by creation ofstakeholders' awareness in this regard. The Government's "Swach Bharat"programme coupled with mega cities looking for solutions for municipal waste managementco-processing of waste for use as RDF is expected to get greater traction in future.
17.3 Controlling Emissions
During the year the Company achieved 100% compliance to New Emission Regulations forcement plants by implementing various primary and secondary measures. Brief details ofthese initiatives are given below: Dust emission control
Various primary measures such as installation of Computational Fluid Dynamics (CFD)study in Electrostatic Precipitators (ESPs) along with up-gradation to 3 phase TransformerRecti3er sets high frequency controllers and rapper panels on coolers etc wereimplemented. The above measures have together resulted in ensuring stack dust emissions inCement Plants < 30mg/Nm3.
NOx emission control
Measures for NOx emission control comprising of CFD modeling meal curtain and low NOxburners as primary measures and installation/ commissioning of SNCR systems in all itsIntegrated Cement Plants as secondary measures have been implemented. This has resulted inensuring compliance to NOx emissions as per new emission regulations.
SOx emission control
The Company's SOx emissions are well within the speci3ed regulatory limits and do notrequire any emission control measures.
All the Company's Plants are required to have continuous online reporting of ambientair quality and process emission on a real time basis on the websites of regulatoryauthorities.
17.4 Circular Economy:
During the year 6.05 million tonnes of 3yash 3.31 million tonnes of slag 1.49million tonnes of crushed rock fines and 0.37 million tonnes of alternative raw materialswere consumed thus providing sustainable and environmentally friendly solution for wastemanagement.
17.5 Water & Nature: Water conservation
In line with its SD 2030 Plan to become water positive the Company continued itse3orts in water conservation particularly through the creation of new water bodiesrehabilitating and replenishing existing water tables and to conserve fresh water throughrain water harvesting in plants mines colonies and within the community in which thePlants operate.
During the year ACC consumed around 2.23 million m3 of harvested rain water in cementoperation which is almost 46% of total water consumption.
This year in its journey to conserve nature and preserve biodiversity InternationalUnion for Conservation of Nature (IUCN) organization was invited to conduct capacitybuilding program for environment and mining managers at the Plants to sensitize and trainthem in the use of Biodiversity Indicators & Reporting Systems (BIRS) for dataanalytics and planning. As per the SD 2030 Plan the Company is committed to bring about apositive change on biodiversity by 2030 vis-a-vis the baseline of 2020. The baselineassessment has already been completed ahead of 2020 and action plan for biodiversityconservation is being 3rmed up in consultation with third party experts.
17.6 Green Building Centers (GBCs)
As part of the ongoing program to promote sustainable green cost e3ective anda3ordable construction in semi-urban and rural India through Green Building centers theCompany supports local micro-entrepreneurs and small businesses to make and marketa3ordable cement-based home building components and pre-fabricated materials. During theyear the Company has assisted in setting up 108 new Green Building Centers. These GreenBuilding Centers have helped in utilization of 37577 MT of Flyash conservation of 81416MT of Earth's
natural top soil and avoidance of 5730 MT of CO2
emission during the year. Further through this initiative in all 27769 low costhousing /shelters have been constructed till date.
Increased resources conservation through enhanced energy and water efficiency use ofrenewable energy minimization of waste etc. during the manufacturing process hascontributed to the betterment of the environment.
17.7 Product Stewardship: Environment Product Declaration and Greenpro Certi3cation
Your Company has been one of the 3rst companies to manufacture eco-friendly productssuch as blended cements and it aims to strengthen its e3orts towards environmentprotection health and safety performance throughout the entire life cycle of itsproducts. During the year 2018 your Company completed the process of assessing its impactacross life cycles of its products through Environment Product Declaration (EPD) for allits cement and concrete products and published the EPDs. Your Company is the 3rst in Indiato obtain certi3ed EPDs for all its cement and concrete products. These EPDs can be usedat National and International level to enhance the Green Building Rating. The Company hasalso obtained Greenpro certi3cation for all the cement products.
18. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES
ACC has structured its Social Development interventions through ACC Ayushmaan Trust(now known as ACC Trust after receipt of necessary approvals) in alignment with GlobalSustainable Development Goals. Community development interventions undertaken in previousyears continued with further vigour and widening of portfolio of projects that includedprojects contributing to national vision of achieving Skilled India'.
Total CSR expenditure incurred by your Company during the year wasRs 20.45 crore whichwas higher than the statutory limit. The CSR Projects of the Company mainly focused on thefollowing broad thematic areas namely sustainable livelihood quality education and WaterSanitation and Hygiene (WASH) that are compliant with the Act and the relevant rulesthereunder.
The Company's community development projects reached out to more than 4.79 lakh peopleresiding in 185 villages across the country. Initiatives taken by the Company to act as anenabler for creation of livelihood helped 17034 farmers to enhance agriculturalproduction through better methods of agriculture and animal husbandry. Company'semployability linked skill development initiatives bene3tted
~2303 youth. ~132 Self Help Groups (SHGs) were supported for formation andinstitutional strengthening while existing ~1430 SHGs were provided with continuedsupport for sustenance and bank linkages. Many SHGs have set up micro enterprises andformulated duly registered federations to achieve larger common good. Educationinitiatives in the vicinity of plants addressed needs of ~ 44338 students during theyear. Disbursement of Scholarships under the Company's VidyaSaarathi scheme which is anend-to-end online scholarship helped ~ 478 meritorious students from weaker sections ofsociety across the districts in which the Company's units are located to get financialsupport to pursue their dream of better education. Modern methods of learning such assmart classes and interactive kiosks bene3tted students in 53 rural schools. E3orts weremade to provide education to ~ 1380 girl children as part of the "ACC kiLaadli" project. Seven Government-run Industrial Training Institutes (ITIs) continuedto receive support under the Public Private Partnership Scheme with Government of India.
Access to WASH is one of the goals of SD 2030 Plan to be achieved by 2030. The WASHpledge is an initiative by the World Business Council for Sustainable Development anOrganization led by CEOs of leading companies including LafargeHolcim Limited. The Companyhas assessed all its Plant sites for WASH and action plan has been drawn up. The Company'sdevelopment initiatives for WASH bene3tted a substantial cross-section of people. Over12581 children received access to better health and nutrition through support provided to305 Anganwadi centres. ART Centers and STI Clinics supported by the Company providedcounseling testing and treatments for HIV/AIDS to more than 3000 persons. The Trust thatwas established in 2007 to support ACC's contribution to combat HIV/AIDs is now the majordriver of ACC's CSR initiatives at plant locations across India.
The unprecedented rains and 3oods which ravaged many parts of Kerala in August 2018resulted in massive loss of lives and destruction of Livelihood property andinfrastructure. Your Company immediately stepped in with resources manpower and logisticssupport to provide on-ground relief and rehabilitation to assist people and localauthorities in the 3ood impacted areas. Along with contributions by the ACC Trust ACCemployees also donated one day's salary in this humanitarian e3ort. 18 ACC InformationKiosks were set up and 11 ACC Help vans were continuously deployed to help the victims.
The Company also extended support and provided relief in Gaja (Cyclone) a3ected areasof Tamil Nadu.
The Company's CSR Projects have been duly audited by a third party Social Audit teamcomprising of renowned experts from development sector led by the Head of DOC ResearchInstitute Berlin. ACC remains the torch bearer for the Industry by undertaking SocialAudit for the past four years and making the assessment report public.
The Company has been awarded accolades for its impactful CSR activities during theyear.
The Company's CSR Policy as stated earlier is in alignment with the requirements of theAct. The CSR Policy Statement and Report on the activities undertaken during the year isannexed to the Board's Report as Annexure B'.
19. HEALTH & SAFETY 3H&S3
The focus on health and safety (H&S) of employees and stakeholders continues.During the year employees and workers were engaged in a meaningful interaction with theultimate aim to build a culture at workplace where safety of life and property isconsidered as paramount. New safety standards were rolled out across the Organization.There was increased engagement of the Management with the employees and contract workersthrough safety campaigns Department-wise "safety corner" meets. etc.
Recognizing that building H&S competencies within the Organization is the key tosafe work environment Hazard Identification & Risk Assessment (HIRA) workshops wereconducted for the employees with a view to equip them to recognize the hazards and risksassociated with a given task and take preemptive action(s).
The initiatives "More Boots on the Ground" and "Visible PersonalCommitment" were pursued vigorously during the year. These initiatives reinforce thevisible personal commitment of senior management towards promoting safety culture atworkplace through role modeling handholding counseling and imparting shopfloor trainingto workers in safe work practices.
Under the Health & Safety Improvement Plan (HSIP) 2018 onus was placed on the TopManagement to engage with employees and workers to bring about improvements in areas suchas H&S leadership & accountability road safety health contractor safetymanagement strengthening frontline safety behavior building people capability &engagement etc. All these initiatives resulted in an overall improvement in safetyperformance in 2018.
During the year all cement and RMX plants were audited for Health and SafetyManagement system to provide assurance on the implementation and e3ectiveness of thesesystems and processes as per LafargeHolcim Group's de3ned protocol. For furtherstrengthening the audit process an online audit website has been developed and launched.
Process Safety Management (PSM) program was launched by the group in February 2018.Pursuant thereto PSM champions were identi3ed from Techport and Plants for auditing thefollowing important areas in the manufacturing process viz. Traditional Fuel Hot MealElectrical Safety and Quarry & Slopes. PSM audit has been completed for all sites andaction plan implementation is in progress. Audits for diesel tank safety were carried outacross the Company in April to control liquid fuel associated hazards.
The Company has been receiving valuable inputs and support on H&S related mattersfrom LafargeHolcim the ultimate holding company. Global H&S Safety Days werecelebrated from 14th 25th May'18 on the theme "I improve health and safetyevery day in my workplace". As part of the safety celebrations several events andactivities were organized across all Plants covering management sta3 SFA and contractorswith focus on building people capabilities in the area of safety.
The practice of sharing key learning from all onsite LTIs and critical incidents acrossall Plants to avoid repeat of similar incidence at other locations has been introduced asper group requirements. It is proposed to widen the knowledge sharing base across all LHGroup Plants.
The Suraksha Laher campaign in 2018 was designed to focus on Safe WorkPlanning'. As part of this campaign awareness training was provided on topics like jobrisk assessment work permits preparation of work method statement review of SOP etc.
During the year Industrial Hygiene survey was conducted at Jamul Bargarh and Tikariaas per Group template. Further a Lifestyle Management Program was also launched duringthe year. Employees having moderate to severe health risks are being regularly monitoredand provided health assistance and significant reduction in health risk was observed."Click2Health" an online health management system has been launched on theCompany's intranet portal for managing health care and for OPD treatment. Protect yourear a hearing conservation program was launched across the Company.
A workshop was organized for promoting Health and Safety in schools and teachers fromall ACC aided schools participated in the workshop. This is a unique initiative to make apositive impact with respect to health and safety behavior in children in the hope thatthis in turn would get re3ected in the health and safety behavior of the employees.
The focus on road safety continues. In order to demonstrate logistic safety commitmentthe "ACC Road Safety Policy" was rolled out and widely circulated at the Plantsand drivers were educated in regard to the same.
The Driver Management Centers set up by the Company at all Plant locations providedvaluable support for driver training and counseling. Multiple activities from DefensiveDriver Induction (DDI) for 3rst trip driver to Defensive Driving Course (DDC) in-cabassessment tool box talks JRM brie3ng were carried out through these Driver ManagementCenters.
During the year Transport Analytics Center (TAC) was set up as a nodal point formonitoring the driving patterns of the drivers through 'In Vehicle Monitoring System'(iVMS) and provide counselling to the drivers on safe methods of driving. The installationof iVMS in the trucks was also accelerated in order to bring more vehicles within theambit of TAC monitoring and counseling.
In-Camera counseling for drivers was launched across all plants. In respect of vehiclesyet to be installed with iVMS camera installed in the driver's cabin serves to record thejourney behavior of the drivers which is later used for driver counselling. Blind spotsbeing a major area of safety concern were identi3ed during the year and safety measureswere taken to eliminate the chances of an accident. In addition a video recording onnegotiating blind spot safely was shown to the drivers employees and their familymembers. "Anti toppling devices" were 3tted in Transit Mixers to preventaccidents caused by roll-over of mixers. "Star Warehouse Program" which waslaunched last year to improve safety standards in warehouse operations continued duringthe year.
20. HUMAN RESOURCES
Your Company believes that its employees are its core strength and accordinglydevelopment of people and providing a 'best-in-class' work environment is a key priorityfor the Organisation to drive business objectives and goals. Robust HR policies are inplace which enables building a stronger performance culture and at the same timedeveloping current and future leaders.
20.1 People for tomorrow
Among the many employee development and training programmes the 'People for Tomorrow'(PFT) programme is designed to ensure a pipeline of talent which is groomed for successionplanning for critical roles within the Organization. The Programme which is specificallydesigned for manufacturingteamsfacilitatesanunderstanding of the business by employeewhile at the same time helps the management in assessing and bridging competency gaps forcritical role holders thereby ensuring a higher level of employee performance. This inturn translates into better business performance
20.2 Creating a new performance culture
Performance for the Company is the sum total of value creation within the Organization.The leadership focus is such that performance is measured on a continuous basis andperformance culture is driven to make every month a successful month. The significantoverall improvement in the performance of the Company during the last- two years is atestimony to the leadership and management focus on this performance driven culture whichhas resulted in highly engaged and motivated teams.
20.3 Taking employee engagement to next level ACC has a rich legacy of nurturingand promoting talent from within the Organization thereby creating a healthy and vibrantwork culture across the Company.
"Innovate to Excel" is one such engagement forum which engages employees at anational level competition across all locations to showcase their innovative ideas andskills. This platform challenges employees to question status-quo at the work place and totake a leap of faith towards our journey of innovation.
Several cultural and social programmes are organised within the Company to recogniseand promote talent which goes a long way in fostering camaraderie among employees andpromotes a sense of belonging in the Organization.
20.4 Industrial Relations
The Company enjoyed harmonious industrial relations during the year. The robustemployee relation practices a collaborative approach to working and vibrant work culturehas created a win-win situation for both employees and the Organization. This caringspirit has gone a long way in maintaining a harmonious environment across all Units.
20.5 Prevention of Sexual Harassment of Women at the Workplace The Company is anequal opportunity provider and continuously strives to build a work culture which promotesthe respect and dignity of all employees across the Organization. In order to providewomen employees a safe working environment at workplace and also in compliance with theprovisions of the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013 and Rules framed thereunder the Company has formulated a well de3nedpolicy on prevention prohibition and redressal of complaints relating to sexualharassment of women at the workplace. All women who are associated with theCompanyeither as permanent employees or temporary employees or contractual personsincluding service providers at Company sites are covered under the above policy. The saidpolicy has been uploaded on the internal portal of the Company for information of allemployees.
An Internal Complaint Committee (ICC) has been set up comprising of three female andone male employee. One of the female employees is the Chairperson and a male employee isthe Secretary of the Committee. There is one external member on the Committee who is aspecialist in dealing with such matters. Apart from the above there is one nodal personin each unit to receive and forward complaints either to the First Instance Person (FIP)who is a woman or directly to the Committee.
The Committee Members and employees are sensitized from time to time on mattersrelating to prevention of sexual harassment. Awareness programmes are conducted at unitlevels to sensitize the employees to uphold the dignity of their female colleagues atworkplace. The Company also promotes e-learning for the employees to cover various aspectsof the subject matter.
No complaints pertaining to sexual harassment of women employees from any of theCompany's locations were received during the year ended December 31 2018.
The Company continues with its endeavour to be an innovative and a responsiveOrganization aligned with its objective to cater to customer needs and optimizing existingand future growth. The thrust on experimenting with new ideas and creating new prototypesis the backbone of the innovation journey and has lead to the development of severalbreakthroughs in cement and concrete applications over the years. More recently theCompany has made forays into the leak-proof market and widened its portfolio ofvalue-added varieties of cement and concrete for special and customized applications. Tobetter its best the Company has developed with its unique blend of ingredients andcutting edge technology premium range of products. The spirit of innovativeness hasreaped significant bene3ts and has helped the Company achieve cost efficiencies in theareas of energy raw materials sourcing logistics customer excellence and manpoweroptimization leading to productivity improvement. LafargeHolcim has been extremelysupportive in the aforesaid areas by lending their expertise.
22. BUSINESS RISKS & OPPORTUNITIES
The Company has a robust governance structure with well de3ned roles andresponsibilities for each vertical. This helps in identi3ng and managing business risk ina proactive manner and at the same time empowes the management to encash businessopportunities. The governance structure inter alia includes a comprehensive framework forstrategic planning implementation and performance monitoring of the business plan whichinter alia includes a well-structured Business Risk Management (BRM) process. With a viewto systematically identify risks and opportunities and monitor their movement a heat maphas been designed comprising of two parameters viz. likelihood of the event and the impactit is expected to have on the Company's operations and performance.
The risks that fall under high likelihood and high impact are identi3ed as key risks.This structured process in identifying risks supports the Executive Committee in strategicdecision-making and development of detailed mitigation plans. The identi3ed risks are thenintegrated into the Company's Planning Cycle which is a rolling process to inter aliaperiodically review the movement of the risks on the heat map and the e3ectiveness of themitigation plan.
The Key business risks and their mitigation plans are as described hereinbelow: RawMaterial Risk Fuel: During the year the Company was adversely impacted by steep risein energy cost. Cement manufacturing is an energy intensive process and there is highdependence on Coal and pet coke which form the principal fuels in production of thermalenergy. Limited availability of domestic coal due to prioritization on allotment of coalto the power sector and resultant reduction in rake availability by the Railways to thenon-power sector impacted the availability of coal thereby hardening the fuel prices.There was also significant increase in Petcoke prices during the year.
More than 5 million tonnes of coal and pet coke are required each year by the Companyto meet the requirements of its kilns and captive power plants. The volatility of fuelprices in the international markets coupled with uncertainty over availability of domesticand linkage coal continue to pose challenges in regard to coal availability and pricing tothe cement industry as well as the Company.
Against this backdrop the Company has taken various initiatives and proactive measureswhich have translated into improved manufacturing performance and have helped insoftening the aforesaid cost pressures. Improved fuel mix at selected plants progressiveincrease in the usage of Alternative fuels 3rming up contracts for part of the volume andbalance on the spot to capitalize on opportunities spreading out purchases throughout theyear are some of the measures adopted by the Company to balance out the impact of thein3ationary costs.
Raw Materials: Limestone being one of the primary raw materials used in themanufacture of cement it is imperative for the Company to ensure its uninterruptedlong-term availability.
As per the Mines and Minerals (Development &Regulation)AmendmentAct2015(MMDR)mining leases granted before the commencement of theAct for captive use are extended upto a period ending on March 31 2030 or till thecompletion of their existing period of renewal whichever is later. Going forward the newmining leases will be allotted for a period of 3fty years through fresh auctions.
Most of the Company's mining leases extend up to March 31 2030 thereby ensuringadequate limestone reserves to cater to the requirements of its plants till the said datewhereafter the Company will have to participate in auctions.
To address the above risks the Company has taken various measures to augment resourcesby initiating the process for conversion of its prospecting licenses into mining leases.The Company is also participating in auctions with a view to securing new mining leasesfor its existing plants as well as for its expansions at different locations. Bearing inmind that limestone is a gradually depleting natural resource and to ensure prudent usageof the mineral in the manufacture of cement higher percentage of additives are used whichenable consumption of the low grade limestone without compromising on the quality andthereby conserving the mineral and increasing the life of the mine.
Forest and Wild Life clearances are a pre-requisite for mining activities. Furtherland acquisition is also becoming more challenging and expensive. The Management is takingadequate steps to put in place robust processes for obtaining fresh EnvironmentalClearances wherever necessary.
As mentioned earlier slag prices hardened during the year on account of spurt indemand coupled with shortage caused by wagon non-availability. In order to minimize theimpact of the in3ating slag prices the Company has diverted its focus to compositecement.
Market Competition: The cement industry is witnessing a significant imbalance inits total installed capacity vis-a-vis the capacity utilization which presently is ~75%.Despite the capacity overhang capacity expansion still continues resulting in intensecompetition and adverse impact on the Company's market share sales volume andprofitability.
E3orts are also being made by the Company to widen the product portfolio by increasingthe share of its premium products in retail segment application based products and valueadded products and services to B2B segment.
Cyber Security: With increased reliance on IT systems and the widespread usage ofinternet for doing business there is a constant threat to the
Company's sensitive data assets being exposed to unethical hacking and misuse. Therami3cations from cyber attacks may not only been con3ned to mere loss of data but mayresult in business and reputation loss.
The Company's IT systems are fully geared to meet the threat of "DDOS"attacks which are highly probable. The Indian Government having recognized the cyberrisks has also introduced tighter Cyber Security laws. Responsibilities have beenentrusted to the Directors of the Company under the Companies Act 2013 to takeappropriate steps to ensure cyber security.
ACC's Business Landscape presents a large surface for a possible attack in view of itsvast and disparate network spread across many remote locations with complex IT and OTenvironment. There is however a strong 3rewall and well established Disaster RecoverySystem within the LafargeHolcim Group. Most of the hardware and software have been mapped.The Company's cyber security management framework aligns with industry standards andregulations. LafargeHolcim has launched a robust programme on cyber security called"Zenith'. This programme is aimed to facilitate LH Group Companies stay abreast andvigilant against possible cyber attacks and remain a step ahead by taking immediateremedial action.
The Company has adequate processes and systems in place to review on a regular basisthe cyber security risks. The Risk Management Committee of the Board is appraised of stepstaken to mitigate cyber security risks.
Legal Risks: The risks arising out of pending legal cases are reviewed on a regularbasis by the Compliance Committee of the Board from the perspective of probability ofimposition of heavy penalty or receiving adverse orders which could have a high financialand/or reputational impact on the Company. All important cases are closely monitored bythe Company and a broad strategy is outlined for e3ective management of litigation relatedrisks. The appointment of external legal counsels has also been rationalized based on therisk associated with the matter and keeping in mind the cost of litigation. The Companyis in the process of developing a well de3ned system which not only tracks the status ofall pending litigations but also provides updates on latest jurisprudence in matterssimilar to those of the Company.
With a view to minimize the risks arising from inadvertent non-compliances withCompetition laws continuous and rigorous Fair Competition training sessions are conductedand e-learning modules are rolled out across the Company for relevant employeesparticularly those in sales and purchase functions. The processes of the Company aresubject to both internal and external audits to identify any gaps which could lead topotential violation of competition law. The Commercial documentation/ directive is alsoreviewed from time to time and strengthened as and when required.
23. INTERNAL CONTROL SYSTEMS
23.1 Internal Audit and its adequacy
The scope and authority of the Internal Audit function is de3ned in the Internal AuditCharter. With a view to maintain independence and objectivity in its working the InternalAudit function reports directly to the Audit Committee. At the beginning of each FinancialYear a risk based annual audit plan is rolled out after the same is approved by the AuditCommittee. The Audit Plan is aimed at evaluation of the e3cacy and adequacy of internalcontrol system and compliance thereof robustness of internal processes policies andaccounting procedures compliance with laws and regulations. Based on the reports ofinternal audit function process owners undertake corrective action in their respectiveareas. Significant audit observations and corrective actions thereon are presented to theAudit Committee of the Board.
23.2 Internal Controls Over Financial Reporting (ICFR) The internal financialcontrols within the Company are commensurate with the size scale and complexity of itsoperations. The controls were tested during the year and no reportable material weaknesseseither in their design or operations were observed. The Company has robust policies andprocedures which inter alia ensure integrity in conducting its business safeguarding ofits assets timely preparation of reliable financial information accuracy andcompleteness in maintaining accounting records and prevention and detection of frauds anderrors.
24. VIGIL MECHANISM / WHISTLE BLOWER POLICY
Your Company has over the years established a reputation for doing business withintegrity and displays zero tolerance for any form of unethical behavior."EthicalViewReporting Policy" (EVRP) is the vigil mechanism instituted by the Company to reportconcerns about unethical behavior in compliance with the requirements of the Act and theSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 (hereinafterreferred to as SEBI Listing Regulations). The Audit Committee of the Board oversees thefunctioning of this policy. Protected disclosures can be made by a whistle blower throughseveral channels to report actual or suspected frauds and violation of Company's Code ofConduct and/or Ethics Policy. Details of the EthicalView Reporting Policy have beendisclosed on its Company's website -http://www.acclimited.com/assets/new/pdf/ethicalview-reporting-policy.pdf During the year the Company reached out to employeesthrough e-learning modules and face-to-face training sessions for creating greaterawareness with respect to the Company's' Anti Bribery and Corruption Directive (ABCD) Thishas helped in achieving a high level of engagement and compliance among the employees.
25. SUBSIDIARY ASSOCIATE AND JOINT VENTURE COMPANIES
Bulk Cement Corporation (India) Limited (BCCI)
During the year under review the revenue from operations of BCCI increased to Rs 18.76crore in 2018 compared to Rs17.27 crore in 2017. The Profit before tax before consideringexceptional items for the year 2018 was Rs 3.39 crore as against Rs 2.88 crore in the year2017.
ACC Mineral Resources Limited (AMRL)
ACC had entered into a Joint Venture with Madhya Pradesh State Mining CorporationLimited (MPSMC) for development of four coal blocks allotted to MPSMC by the Government of
India through its wholly owned subsidiary ACC Mineral Resources Limited. Consequentupon the cancellation of the allocation of all coal blocks including the four coal blocksallotted to MPSMC by the Government of India as per the Orders of the Supreme Court passedin September 2014 AMRL does not have any business activity and correspondingly did nothave any operating income during the period under review.
The Company has three other Subsidiary Companies having limestone deposits viz. LuckyMinmat Limited National Limestone Company Private Limited and Singhania Minerals PrivateLimited. Singhania Minerals Private Limited is operational while the other two companiesare not operational.
25.2. MATERIAL SUBSIDIARIES
None of the subsidiaries mentioned in para 25.1 above is a material subsidiary as perthe thresholds laid down under the SEBI Listing Regulations. The Board of Directors of theCompany has approved a Policy for determining material subsidiaries in line with the SEBIListing Regulations. The Policy is also being revised e3ective from April1 2019 in linewith the amendments made to the SEBI Listing Regulations. The Policy has been uploaded onthe Company's website at: http://www.acclimited.com/assets/new/pdf/CG/Determiningmaterialsubsidiaries.pdf
25.3 JOINT VENTURE /ASSOCIATE COMPANIES OneIndia BSC Private Limited is a JointVenture
Company with equal participation with Ambuja Cements Limited to provide back o3ceservices to the two Companies with respect to routine transactional processes.
Your Company also has a Joint Venture with Aakaash Manufacturing Company PrivateLimited for manufacture and supply of ready mix concrete. As on December 31 2018 thefollowing is the list of Associate Companies:
Alcon Cement Company Private Limited
Asian Concretes and Cements Private Limited
26. CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements of the Company for the year 2018 are prepared incompliance with the applicable provisions of the Act including Indian Accounting Standardsspeci3ed under Section 133 of the Act. The audited consolidated financial statementstogether with the Auditors' Report thereon form part of the Annual Report.
Pursuant to Section 129(3) of the Act a Statement containing salient features of thefinancial statements of each of the Subsidiaries Associates and Joint Venture Companiesin the prescribed Form AOC-1 is attached.
The Financial Statements of the subsidiaries associates and joint venture companiesare available for inspection by the Members at the Registered O3ce of the Company pursuantto the provisions of Section 136 of the Act. The Company shall provide free of cost acopy of the financial statements of its subsidiary companies to the Members upon theirrequest. The statements are also available on the website of the Company atwww.acclimited.com under the Investors' section.
27. DIRECTORS & KEY MANAGERIAL PERSONNEL
27.1 Changes in Directorate
The Independent Directors of the Company have been appointed by the shareholders at theExtra Ordinary General Meeting held on September 10 2014 for a term of five years fromtheir respective dates of appointment as per the requirements of the Act and the SEBIListing Regulations. The appointments of Mr Shailesh Haribhakti Mr Sushil Kumar RoongtaMr Ashwin Dani and Mr Farrokh Kavarana were e3ective from July 24 2014 while those of MrArunkumar Gandhi and Ms Falguni Nayar were e3ective from April 24 2014. Pursuant to theCompany's Succession policy applicable to the directors which provides that a person shallnot be eligible for appointment as a director of the Company upon attaining the age ofseventy five years. Mr Ashwin Dani Mr Farrokh
Kavarana and Mr Arunkumar Gandhi have attained or will attain the age of seventy fiveyears during their current tenure of appointment and have expressed their inability toseek re-appointment from the conclusion of the forthcoming Annual General Meeting.
The Board of Directors has placed on record its sincere appreciation for the richcontribution made by Mr Ashwin Dani Mr Farrokh Kavarana and Mr Arunkumar Gandhi duringtheir tenure of association as Independent Directors.
Considering the above it is proposed to appoint Mr Damodarannair Sundaram Mr SunilMehta and Mr Vinayak Chatterjee as Independent Directors with e3ect from the conclusion ofthe forthcoming Annual General Meeting for a period of five consecutive years subject totheir appointment being approved by the Members. All the above named persons have giventheir consent for the appointment and have con3rmed that they are not in any waydisquali3ed from being appointed as directors. They have also given their con3rmation withregard to their independent status vis--vis the Company. The persons identi3ed forappointment are persons of pre-eminence and the Board feels that it would be enrichedfurther by their induction as Independent Directors. Detailed Profiles of the above namedpersons setting out their accomplishments are appended to the Explanatory Statementaccompanying the Notice for the Annual General Meeting. The Company has received noticesfrom a Member under Section 160 of the Act proposing their candidature for appointment asDirectors and the Nomination and Remuneration Committee as also the Board of Directorshave recommended their appointment. Approval of the Members by ordinary resolutions forappointing the aforesaid persons as Independent Directors for a term of five consecutiveyears has been sought in the Notice convening the Annual General Meeting of the Company.(Please refer to Item Nos. 8 9 and 10 of the Notice).
Mr Shailesh Haribhakti Mr Sushil Kumar Roongta and Ms Falguni Nayar upon completion oftheir 3rst term of appointment as Independent Directors during the current year areeligible for re-appointment for another term of five consecutive years subject to approvalof the Members by special resolution. The said Directors have given their consent forre-appointment and have con3rmed that they still retain their status as IndependentDirectors and that they do not su3er from any disQualifications for appointment. Theproposal for their re-appointment is based on the evaluation of their performance carriedout by the Board other than the persons evaluated.
The Company has received notices under Section 160 of the Act from a Member proposingthe re-appointment of Mr Shailesh Haribhakti Mr Sushil Kumar Roongta and Ms Falguni Nayaras Independent Directors of the Company. Approval of the Members by special resolutionsfor appointing the aforesaid persons as Independent Directors for a further term of fiveconsecutive years has been sought in the Notice convening the Annual General Meeting ofthe Company. (Please refer to Item Nos. 5 6 and 7 of the Notice).
27.2 Directors liable to retirement by rotation The Independent Directors hold o3cefor a 3xed period of five years from the date of their appointment and are not liable toretire by rotation. Out of the remaining 5 Non-Executive/ Non-Independent Directors inaccordance with the provisions of the Act and the Articles of Association of the CompanyMr N. S Sekhsaria and Mr Christof Hassig being longest in o3ce retire by rotation andbeing eligible o3er their candidature for re-appointment as Directors.
27.3 Board E3ectiveness a. Familiarization Program for the Independent Directors TheCompany has over the years developed a robust familiarization process for the newlyappointed Directors with respect to their roles and responsibilities way ahead of theprescription of the regulatory provisions. The process has been aligned with therequirements under the Act and other related Regulations. This process inter-alia includesproviding an overview of the Cement Industry the Company's business model the risks andopportunities etc.
Details of the Familiarization Programme are explained in the Corporate GovernanceReport and are also available on the Company's website at http://www.acclimited.com/assets/new/pdf/ CG/Familiarization-Programme-for-Independent-Directors.pdf b. Board Evaluation The Board has carried out itsannual performance evaluation of its own performance the Directors individually as wellas the evaluation of the working of its Audit Nomination & Remuneration RiskManagement and Compliance Committees as mandated under the Act and SEBI ListingRegulations. The criteria applied in the evaluation process are explained in the CorporateGovernance Report.
27.4 Key Managerial Personnel
The following are the Key Managerial Personnel of the Company in terms of theprovisions of the Act read with The Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 as on December 31 2018:
Mr Neeraj Akhoury Managing Director & Chief Executive Officer
Mr Sunil Nayak Chief Financial Officer
Mr Ramaswami Kalidas Company Secretary & Head Compliance
27.6 Remuneration Policy and Criteria for selection of candidates for appointment asDirectors Key Managerial Personnel and Senior leadership positions The Company has inplace a policy for remuneration of Directors Key Managerial Personnel and Members of theExecutive Committee (ExCo) as well as a well-de3ned criteria for the selection ofcandidates for appointment to the said positions which has been approved by the Board. ThePolicy broadly lays down the guiding principles philosophy and the basis for payment ofremuneration to the executive and non-executive Directors (by way of sitting fees andcommission) Key Managerial Personnel and ExCo. The criteria for selection of candidatesfor the above positions cover the various factors and attributes which are considered bythe Nomination & Remuneration Committee and the
Board of Directors while making a selection of the candidates. The above policyalongwith the criteria for selection is available at the website of the Company athttp://www.acclimited.com/ assets/new/pdf/CG/Policy_remuneration_selection_for_appointment.pdf
28.1 Board Meetings
During the year six Board Meetings were convened and held the details of which aregiven in the Corporate Governance Report.
28.2 Audit Committee
The Audit Committee comprises five members. The Chairman of the Committee is anIndependent Director. The Committee met six times during the year. Details of the role andresponsibilities of the Audit Committee the particulars of meetings held and attendanceof the Members at such Meetings are given in the Corporate Governance Report.
28.3 CSR Committee
The CSR Committee comprises of four members of which three are Independent Directors.The Chairman of the Committee is an Independent Director. The Committee met thrice duringthe reporting period. Details of the role and functioning of the Committee are given inthe Corporate Governance Report.
29. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
The Company has developed a Related Party Transactions Manual and Standard OperatingProcedures for the purpose of Identification and monitoring Related Party transactions.
All transactions with Related Parties are placed before the Audit Committee as also theBoard for approval. Prior omnibus approval of the Audit Committee and the Board isobtained for the transactions which are foreseeable and of a repetitive nature. Thetransactions entered into pursuant to the approvals so granted are subjected to audit anda statement giving details of all related party transactions is placed before the AuditCommittee and the Board of Directors on a quarterly basis. The statement is supported by acerti3cate from the CEO & MD and the CFO.
The policy on Related Party Transactions as approved by the Board of Directors has beenuploaded on the Company's website and can be seen at the link http://www.acclimited.com/assets/new/pdf/CG/PolicyonRPT.pdf All transactions entered into with related partiesduring the year were on arm's length basis and were in the ordinary course of business.The details of the material related party transactions entered into during the year as perthe policy on Related Party Transactions approved by the Board have been reported in FormAOC 2 annexed to the Directors' Report as Annexure 'C'.
None of the Directors and the Key Managerial Personnel has any pecuniary relationshipsor transactions vis--vis the Company.
30. TRANSFER OF EQUITY SHARES UNPAID/UNCLAIMED DIVIDEND TO THE INVESTOR EDUCATION ANDPROTECTION FUND
In line with the statutory requirements the Company has transferred to the credit ofthe Investor Education and Protection Fund set up by the Government of India equityshares in respect of which dividend had remained unpaid/ unclaimed for a period of sevenconsecutive years within the time lines laid down by the MCA. Unpaid/unclaimed dividendfor seven years of more has also been transferred to the IEPF pursuant to the requirementsunder the Act.
31. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
Complaint 3led under the Competition Act by the Builders Association of India againstcement manufacturers - Appeal before the Supreme Court of India
As reported in detail in reports of earlier years a penalty of Rs 1147.59 crore waslevied on the Company by the Competition Commission of India based on a complaint 3led bythe Builders' Association of India for alleged violation of the provisions of theCompetition Act.
The National Company Law Appellate Tribunal (NCLAT) vide its judgment dated 25th July2018 has dismissed the appeal of the Company upholding the levy of penalty of Rs1147.59crore as imposed by the Competition Commission of
India vide its Order dated 31st August 2016. The NCLAT initially vide its Order dated7th November 2016 had stayed the operation of the CCI's Order subject to deposit of 10% ofthe penalty amount.
The Company has preferred an appeal before the Hon'ble Supreme Court against the aboveOrder of NCLAT. The Hon'ble Supreme Court vide its Order dated 5th October 2018 hasadmitted the Company's civil appeal and ordered for continuance of the interim orderspassed by NCLAT towards stay on the demand subject to deposit of 10% of the penaltyamount. The matter is still subjudice.
As at December 31 2018 the penalty amount of
Rs 1147.59 crore and interest thereon has been disclosed as a contingent liability inthe Notes to Financial Statements.(Refer Note 40(A)(a)).
CCI's Order on Complaint 3led by Director Supplies & Disposals State of Haryanain 2013 The Director Supplies & Disposals State of Haryana had 3led a complaintbefore CCI alleging collusion and bid rigging by cement manufacturers in violation ofSection 3(1) and 3(3)(d) of the Competition Act. In January 2017 the CompetitionCommission of India (CCI) passed an Order against seven cement manufacturers including theCompany imposing a penalty calculated at the rate of 0.3% of the average turnover of thelast three years viz. 2012-13 to 2014-15. In respect of the Company the amount of penaltyworks out to Rs 35.32 crore.
An Appeal is pending before NCLAT in the said matter against the Orders of theCompetition Commission of India.
As at December 31 2018 the penalty amount of Rs 35.32 crore is disclosed as acontingent liability in the Notes to Financial Statements.(Refer Note 40(A)(b)).
Reference is drawn to the 'Emphasis of Matter' by the Auditors in their reports on theabove matters.
32.1 Statutory Auditor
M/s. Deloitte Haskins & Sells LLP Chartered Accountants (ICAI Firm RegistrationNumber 117366W/W-100018) were appointed as Statutory Auditor of the Company at the 81stAnnual General Meeting held on
March 29 2017 to hold o3ce from the conclusion of the said Meeting till the conclusionof the 86th Annual General Meeting to be held in 2022 subject to rati3cation of theirappointment by the Members at every intervening Annual General Meeting held thereafter.The requirement of seeking rati3cation of the members for continuance of their appointmenthas been withdrawn consequent upon the changes made by the Companies (Amendment)Act 2017with e3ect from May 07 2018.Hence the resolution seeking rati3cation of the members fortheir appointment is not being placed at the ensuing Annual General Meeting.
32.2 Cost Auditor
M/s D C Dave & Co. Cost Accountants (Firm Registration No 30611) have beenappointed as Cost Auditor of the Company for the year 2018 under Section 148 of the Actread with The Companies (Cost Records and Audit) Amendment Rules 2014.
M/s D C Dave & Co have con3rmed that they are free from any disQualifications asspeci3ed under the Act. They have further con3rmed their independent status.
The remuneration payable to the Cost Auditor is required to be placed before theMembers in a general meeting for their rati3cation. Accordingly Resolution seekingMembers' rati3cation for the remuneration payable to M/s D C Dave & Co Cost Auditoris included at item No.11 of the Notice convening the Annual General Meeting.
32.3 Secretarial Auditor
M/s. Pramod S Shah & Associates a 3rm of Company Secretaries in Practice havebeen appointed to undertake the Secretarial Audit of the Company pursuant to theprovisions of Section204oftheActtheCompanies(Appointment and Remuneration of ManagerialPersonnel) Rules 2014 and the SEBI Listing Regulations as amended. The Report of theSecretarial Auditor is annexed to the Board's Report as Annexure D'.
During the year under review your Company received numerous awards and accolades whichwere conferred by reputable organizations and distinguished bodies for achievements indiverse 3elds such as Health & Safety Manufacturing and Environment ManagementCorporate Governance etc.
CII-ITC Sustainability Awards 2018 -
Received the highest recognition for Outstanding Accomplishment' under CorporateExcellence category.
Business and Financial Reporting Excellence O Institute of Chartered Accountants ofIndia (ICAI) - Awarded a plaque 'Commended Annual Report in Category VII Manufacturing and Trading Sector
(Turnover equal to Rs 3000 crore or more)' for Excellence in Financial Reporting.
Corporate Social Responsibility
The Government of Odisha awarded
ACC the Most Innovative CSR Project' for VidyaUtkarsh at the Make in OdishaConclave 2018 in Bhubaneswar in recognition towards creating a social environmental andeconomic value for its host Communities in Odisha.
Indywood CSR Excellence Award 2018 in the category of Best CSR practices inPromoting Biodiversity.
Lakheri plant was awarded the CSR Health
Impact Award - Bronze for the Women and Child Health Initiative category.
Golden Peacock Award for Corporate Social
Responsibility' at the 12th International Conference on Corporate Social Responsibility(CSR) held in Bengaluru.
Environment & Sustainability
5 Star rating by the Ministry of Mines for Sustainable Development to GovariLimestone Mines in Chanda Mehgaon and Bamangawan Mines in Kymore and Jamul LimestoneMines.
Gagal Plant won 'Sustainability 4.0 2018 award' instituted by Frost &Sullivan and The Energy and Resources Institute (TERI) for continious improvement in the3eld of Sustainable Development in the category 'Leaders Award-Large Business ProcessSector'. Sustainability 4.0 awards is designed to honour the e3orts made by the companieswho actively integrate sustainability principles into their business culture.
The Company was awarded the GreenPro certi3cation for ACC Suraksha Power ACCConcrete+ Xtra Strong ACC HPC Long Life ACC Gold Water Shield and ACC F2R Superfastproducts by the Confederation of Indian Industries (CII) at the 14th Green Cementechconference.
Thondebhavi Plant was recognised as an
Energy E3cient Unit by the Confederation of Indian Industry (CII) at the 19th NationalAward function for Excellence in Energy Management 2018.
Kymore Jamul and Wadi Plants were recognised as Excellent Energy E3cientUnit' by the Confederation of India Industry (CII) at the 19th National Award function forExcellence in Energy Management 2018. O Jamul Plant was awarded 1st Runner-Up in LargeScale Category at the Confederation of Indian Industry (CII) Energy Conservation (encon)Awards function 2018.
O Thondebhavi Plant won the 1st Prize in Energy Excellence in Grinding Unit category atthe Quality Circle Forum of India (QCFI) Hyderabad Chapter awards in collaboration withCement Manufacturers Association (CMA) National Council for Cement and Building Materials(NCCBM) and Cement Sustainability Initiative. O Jamul Plant won the 1st Prize in EnergyExcellence in Integrated Unit category at the Quality Circle Forum of India (QCFI)Hyderabad Chapter awards in collaboration with Cement Manufacturers Association (CMA)National Council for Cement and Building Materials (NCCBM) and Cement SustainabilityInitiative.
Wadi Plant won the 1st Prize in Alternate Fuels and Raw Materials Excellence and2nd Prize in Environment Excellence at the Quality Circle Forum of India (QCFI) HyderabadChapter awards in collaboration with Cement Manufacturers Association (CMA) NationalCouncil for Cement and Building Materials (NCCBM) and Cement Sustainability Initiative.
ACC was conferred with the prestigious Yes Bank Natural Capital Award2018' in the Eco-Corporate category under Manufacturing Sector' for itssustainability initiatives.
At the Mines Environment and Mineral
Conservation Week (MEMCW) celebrated in Dehradun Gagal Plant won the 1st Prize inOverall Performance Mineral Conservation Scienti3c Development of Mines SustainableDevelopment and A3orestation and the 2nd prize in Air and Water Monitoring.
Awarded Silver Prize in the Environmental Communications category forSustainable Development Report 2017 at the 58th ABCI Annual Awards.
Awarded Bronze Prize in the Social
Responsibility Communications category for Muskaan an animated 3lm on femaleinfanticide at the 58th ABCI Annual Awards.
Awarded Bronze Prize in the External
Magazines category for the Indian Concrete Journal at the 58th ABCI Annual Awards.
ACC won the Golden Peacock Award for
Excellence in Corporate Governance for the year 2018 at the 18th Annual London GlobalConvention on Corporate Governance & Sustainability and Global Business Meet inLondon.
Awarded a Certi3cate of Recognition for
Excellence in Corporate Governance by the Institute of Company Secretaries of India(ICSI).
Awarded the title of the Third Fastest
Growing Company Large Category 2017-18' (Cement Category) at the Third IndianCement Review Awards held at the 10th Cement Expo.
Chaibasa Plant won the award for OSH
Innovation AwardEmployee AwarenessReactive' for the implementation ofIn-Cab assessment for drivers and counselling on critical driving behaviours during anassessment on harsh acceleration harsh brakes over speeding and harsh manoeuvres.
Lakheri Plant won the award for OSH
Innovation AwardEmployee AwarenessProactive' for the implementation ofProactive analysis of GPS data and counselling through Driver Management Centres whichresulted in a lower incidence of road accidents and an increase in the percentage of safekilometres at the Occupational Safety and Health (OSH) India Awards 2018.
ACC was adjudged winner of Innovation in OSHSafetyimplementationProactive' for its implementation of In-Cab camera in truck - a toolused to identify behavioural aspects of truck drivers of truck drivers in response tohighly dynamic tra3c conditions at the Occupational Safety and Health (OSH) India Awards2018.
Thondebhavi Plant received the prestigious
Greentech Safety Award 2018 in the Gold Category' in the Cement sector forOutstanding Achievements in Safety Management' at the 17th Annual Greentech SafetyAward.
Jamul Plant won the Rio Tinto Health &
Safety Award for Opencast Mines' (2017-2018) for their exemplary performance inimplementation of safety management systems and safe work culture.
34. ENHANCING SHAREHOLDERS VALUE
Our commitment is to create and return value to shareholders. Accordingly your Companyis committed to achieving high levels of operating performance cost competitivenessenhancing the productive asset and resource base and striving for excellence in all areasof operations. YourCompany3rmlybelievesthatitssuccessinthe market place and goodreputation are among the primary determinants of value to the shareholder. Our closerelationship with customers and an understanding of their challenges drive the developmentof new products and services. With our expertise and know-how we aim to o3er ourcustomers solutions that enhance their projects and build trust in our partnerships.Beyond these solutions our market growth activities are focused on creating new channelsto serve our customers more e3ectively. Innovation is present not only in our products andservices but also in the way we execute growth opportunities. Anticipating customer needsearly and being able to address them e3ectively requires a strong commercial backbone. AtACC we are developing this strength by institutionalizing sound commercial processes andbuilding world-class commercial capabilities across our marketing and sales.
Your Company is also committed to creating value for its other stakeholders by ensuringthat its corporate actions positively impact the economic societal and environmentaldimensions of the Triple Bottom Line.
35. CORPORATE GOVERNANCE
The Annual Report contains a separate section on the Company's corporate governancepractices together with a certi3cate from the Company's Auditors con3rming compliance asper SEBI Listing Regulations.
A separate section on Business Responsibility forms part of this Annual Report asrequired under Regulation 34(2)(f) of SEBI Listing Regulations.
37. ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
Information on conservation of energy technology absorption and foreign exchangeearnings and outgo as stipulated in Section 134(3)(m) of the Act read with Rule 8 of TheCompanies (Accounts) Rules 2014 is provided in Annexure E' to the Directors'Report.
38. PARTICULARS OF EMPLOYEES
Disclosure pertaining to the remuneration and other details as required under Section197(12) of the Act and the Rules framed thereunder is enclosed as Annexure F' tothe Board's Report.
The information in respect of employees of the Company required pursuant to Rule 5 ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 will beprovided upon request. In terms of Section 136 of the Act the Report and Accounts arebeing sent to the Members and others entitled thereto excluding the aforesaid Annexurewhich is available for inspection by the Members at the Registered O3ce of the Companyduring business hours on working days of the Company up to the date of the ensuing AnnualGeneral Meeting. If any Member is interested in obtaining a copy thereof such Member maywrite to the Company Secretary in this regard.
39. ANNUAL RETURN
The Annual Return of the Company has been placed on the website of the Company and canbe accessed at http://www.acclimited.com/newsite/ annualreport2018/Form_MGT_7.pdf
40. COMPLIANCE WITH SECRETARIAL STANDARDS
The Board of Directors a3rms that the Company has complied with the applicableSecretarial Standards issued by the Institute of Companies Secretaries of India (SS1 andSS2) respectively relating to Meetings of the Board and its Committees which havemandatory application.
41. DIRECTORS' RESPONSIBILITY STATEMENT
To the best of their knowledge and belief and according to the information andexplanations obtained by them your Directors make the following statement in terms ofSection 134 of the Act: a) that in the preparation of the annual financial statements forthe year ended December 31 2018 the applicable accounting standards have been followedalong with proper explanation relating to material departures if any; b) that suchaccounting policies as mentioned in Note 2 of the Notes to the Accounts have been selectedand applied consistently and judgment and estimates have been made that are reasonable andprudent so as to give a true and fair view of the state of Affairs of the Company as onDecember 31 2018 and of the profit of the Company for the year ended on that date;
c) that proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
d) that the annual accounts have been prepared on a going concern basis;
e) that proper internal financial controls laid down by the Directors were followed bythe Company and such internal financial controls are adequate and were operatinge3ectively; and
f) that proper systems to ensure compliance with the provisions of all applicable lawshave been devised and such systems were adequate and were operating e3ectively.
42. INTEGRATED REPORTING
The Company being one of the top 500 companies in the Country in terms of marketcapitalization as part of its voluntary initiatives has drawn up its 3rst IntegratedReport which encompasses both financial and non-financial information to enable theMembers to take well-informed decisions and have a better understanding of the Company'slong term perspective. The Report also touches upon aspects such as Organisation'sstrategy governance framework performance and prospects of value creation based on thesix forms of capital viz. financial capital manufactured capital intellectual capitalhuman capital social and relationship capital and nature capital. The Integrated Reportfor the year 2018 has also been hosted on the Company's website www. acclimited.com.
The Annual Report also carries a detailed section containing the "BusinessResponsibility Report". Since 2007 the Company has been publishing an annualCorporate Sustainable Development Report conforming to the guidelines of the GlobalReporting Initiative. From the year 2014 these reports are based on the GRI G4 guidelinesin accordance with the "Comprehensive" option and have been externally assured.
The Directors acknowledge the support received by the Company from the Central andState Government Ministries and Departments shareholders customers business associatesbankers employees trade unions and all other stakeholders.
44. CAUTIONARY STATEMENT
The Board's Report and Management Discussion
& Analysis may contain certain statementsdescribingtheCompany'sobjectivesexpectations or forecasts that appear to beforward-looking within the meaning of applicable securities laws and regulations whileactual outcomes may di3er materially from what is expressed herein.
The Company is not obliged to update any such forward-looking statements. Someimportant factors that could in3uence the Company's operations comprise economicdevelopments pricing and demand and supply conditions in global and domestic marketschanges in government regulations tax laws litigation and industrial relations.
For and on behalf of the Board of Directors
|N S Sekhsaria |
|February 05 2019 |